Tuesday, January 16, 2007

Economics of Trying New Things

A post at Free Exchange discusses a small purchase he made that brought him a lot of joy. The key part of his post is this:
While I was at AEA, I had lunch with Dick Thaler, the famous behavioural economist from the University of Chicago. He lauded my (much derided) penchant for experimental purchases of small items at supermarkets and drugstores, pointing out that at my age, the net present value of future utility from a "find" is huge, while the costs (pecuniary and utilitarian) are negligible.
The idea is that young people should try a lot of new things because if they find something you like, you have much of your life left to enjoy it. Even if you try 10 new foods and only like 1 of them, you have given up relatively little and gained a lot of future enjoyment.

What do you think about this idea? Is it a good reason to try new things? Or is there a better reason to stay with what you like? What else could this apply to other than trying new foods?

An personal addendum to this rule that I used when travelling in Japan is that I am willing to try any food, provided I am not told what it is or what is in it until after I have tried it. It helps me keep an open mind.

(Source: Free Exchange)


Anonymous said...

I completely agree with the idea that you should try new things. Trying knew things can result in either a waste, which would be a cost, or a benefit derived from a newly discovered pleasure. However, if you dont try new things, you will never know what could have been. In contradiction to what i just stated, trying something that you end up not liking is an opportunity cost--you could have spent your time, money, and energy buying an item that will definatly provide a benefit.
This could also apply to restaurants--either you waste your time, energy, and money on a restaurant with bad service and awful food or you end up loving the new place, creating future benefit and enjoyment. This could also apply to seeing new places. You either waste your time and gas money to see a new place (if you dont need a plane ticket, costs are low) and hate it or realize that this place is amazing. It is a small cost that could result in immense future enjoyment. I think the older you get, the less likely you want to experiment with what you do and don't like or what you might like because you will have less time to enjoy it in the future as you age.

Anonymous said...

I agree with a lot of what Alena has said. Although some cost is involved if you try something new and do not like it, the benefit from finding something new and enjoyable is larger and can benefit more in the long run, but this is only true with young people. Older people have a higher cost of trying new things, especially if they do not like them because they are just waisting the time (the little of it that they have left). I believe that this is a good way to look at trying new things, however, what is not taken into account is the people that get pure pleasure just from trying things. Being spontaneous and trying new and different things may be the only benefit some are looking for, therefore there would be no significant cost if the person would not neccesairly keep trying that "thing" over and over again.
-Sara Diehl

Anonymous said...

While I agree with both Alena and Sara in the idea that people are more willing to try new things while they are younger and that the benefit is potentially higher because they will have more time to enjoy it; I don't think that young people are more willing to try something new because it has a lower cost. As people get older, they are more likely to have more resources such as wealth and experience, which enable them to try new and more things, some of which are not even available to younger people because of cost or age limit, at a lower cost. Also, the idea that the benefit will not be as great because you will not be able to enjoy something as long if you discover it later in life, is not necessarily true, because no one is guaranteed a long life. So, everyone, no matter what age should learn that it is important to try new things because for younger people the long term benefit could be great, and for older people the cost of trying something is lower.
-Emily S.